Market Internals: More 52-Week Lows Last Week Than at August Lows

We are all participants in this "Market of stocks", and not necessarily the "Stock Market" itself. I know that it's cliché and we hear this a lot, but let's remember what it actually means. We always focus on the major indexes: What are large-caps doing versus small-caps? What is key support for the S&P500 or Dow Industrials or Nasdaq100? But each index is made up of individual components: 500 companies or 30 or 100, depending on which one we're looking at. The internals represent what the actual stocks are doing. They tell us a lot about the index itself, not just the other way around.

Back in 2008-2009, as the S&500 and Dow Industrials were making lower lows in price, the internals were strengthening. The most amount of 52-week lows that were made on the New York Stock Exchange came at the October lows. In November, the indexes hit lower prices, but fewer stocks made 52-week lows, the first sign of internal strength. Then in March, the indexes made even lower lows, but once again fewer individual names confirmed.

In other words, with each new low in the market, the internals were quietly strengthening within. This phenomenon did not happen last week before the big reversal that everyone is talking about. Look at the chart below via Bloomberg:

Last Monday and Tuesday the S&P500 broke below the August 8th lows. This time, even more lows were made on the NYSE. So we're not seeing the internals strengthen yet like we saw at the 2009 bottom.

What does this mean?

I don't think that it's the end of the world. We can still have a decent rally. But we need to see more before we can say that a new sustainable bull market is here. The overhead supply at 1260 in the S&P500 and 11900 on the Dow is for real. I think the amount of 52-week lows last week exceeding that of the previous market lows in August confirms that.

Tags: $SPY $SPX $DJIA $DIA